Thomas Pascoe worked in both the Lloyd's of London insurance market and in corporate finance before joining the Telegraph. He writes about the financial markets. His email is thomas.pascoe@telegraph.co.uk and his Twitter address is @PascoeTelegraph

Oil in the outback is exciting, but Australia is not the new Saudi Arabia

Linc Energy, a former tiddler listed on the Australian Stock Exchange, has reported that two independent consultants have estimated that between 133 and 233 billion barrels of oil equivalent lay within its 16 million acres in the Arckaringa Basin, South Australia. The firm is now seeking around £200m from investors to dig six horizontal wells into the shale, giving a better indication of reserve levels. It will probably also take a joint-venture partner with shale experience to give technical expertise.

There are a number of cautionary notes which ought to be sounded. Firstly, reports in the Australian media declaring a $20 trillion value of the deposits make a number of questionable assumptions. To break down, these require a tour through the terminology.

Linc's deposits are unrisked. This means that they were assessed by taking all the oil which is originally in place and then multiplying it by a recovery factor which represents a stab at the proportion of oil in the reservoir which it would be technically feasible to extract given the surrounding sediment (c. 35pc to 45pc). A better measure, and we don't have this yet, is risked deposits, which takes the unrisked number and multiplies it by the chance of drilling success. This will almost certainly give a lower number still. So it's likely that these estimates will come down once risked reserves are calculated.

Then there is the question of the estimate used. Standard practice for British and American oil plays is to report reserves separately for P1 (90pc chance of recovery), P2 (50pc chance) and P3 (10pc chance). Taking the P1 unrisked estimates provided by the consultancy of De Golyer and MacNaughton, the state of play at present is that there are 14 bbo of oil and a total 60 bboe of oil and other energy products like gas and condensates in the shale. The 233bboe figure comes from Gustavson Associates' best guess, a P2 figure. The extent to which the P1 and P2 figues of the two consultancies are apart gives an indication of how speculative the enterprise is at this point. Once risking is taken into account, DeGoyler and MacNaughton suggest the true reserve may be 3.5 bboe, a lot, but rather less than Saudi Arabia's 263 bboe reserves to which this discovery was being compared.

In any case, it is an exciting find. Australia has been remarkably fortunate with its mineral wealth in the past decade. Despite the best efforts of its politicians to hinder its growth through the Mineral Resources Rent Tax and Carbon Tax, the nation has benefited from sound monetary policy as much as proximity to China. Even after December's cut, the interest rate stands at 3pc, growth at 3.1pc and Oz is one of the few Western economies other than Canada to have weathered the global storm currently engulfing Europe. They have been lucky with their deposit base, but that luck is the result of a well managed, diversified economy.

One final thought. Peak oil? Proven reserves have added 681 bboe in 30 years and are growing still. The lights won't be going off any time soon.